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10 End of Year Tax Tips to Increase Your Tax Refund

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It’s hard to believe that we’re in the last quarter of the year! With 2021 coming to an end, now is a great time to make some easy and smart tax moves to help lower your tax bill and increase your tax refund when you file.

Start compiling all of your receipts for any tax-deductible expenses and sources of income because these 10 quick and easy tax tips will help you get your finances organized and save money at tax-time before the year ends!

1. Defer bonuses: If your hard work paid off and you are expecting a year-end bonus, this extra money in your pocket may bump you up to another tax bracket and increase the taxes you owe. If your bonus bumps you up to another tax bracket, you may want to consider delaying the extra income until the beginning of next year. If your boss is able to pay you your bonus in January, you will still receive it close to year-end, but you won’t have to pay taxes on it when filing your 2021 taxes.

2. Accelerate deductions & defer income: There are a handful of tax deductions that are recognized the year in which you pay them. For example, if you own a home, you can deduct your mortgage interest paid, and if you make an extra mortgage payment on December 31, you may be able to claim the additional interest paid as a tax deduction in the tax year paid.

This lets you take the tax deduction immediately rather than wait an additional 12 months when you do your taxes for next year. Before using this strategy, be aware that under tax reform, if you purchased a new home after December 15, 2017, you can deduct the mortgage interest you paid based on a home loan up to $750,000 instead of $1,000,000 for homeowners who purchased before that date.

3. Donate to charity: The holiday season is coming, which is a great time to clean out your closet and household goods for those in need. You can help someone in need and reap the benefits of a tax deduction for non-cash and monetary donations given to a qualified charitable organization if you can itemize your tax deductions.

If you volunteer at a qualified charitable organization, don’t forget that you can also deduct your mileage (14 cents of every mile) driven for charitable service. Make these donations count on your taxes by donating by December 31st. Even if you make a donation by credit card, you do not have to pay it off in 2021 to receive the tax deduction.

Typically if you make a charitable donation to a qualified charity, you can deduct the contribution if you itemize your deductions. However, under the CARES Act, there is the addition of a new charitable deduction up to $300 on your 2021 taxes for your cash donations made to a 501(c)(3) organization even if you don’t itemize and claim the standard deduction. For tax year 2021, this amount is up to $600 per tax return for those filing married filing jointly and $300 for other filing statuses. This will be something to keep in mind since close to 90% of taxpayers now claim the standard deduction instead of itemizing and are no longer able to deduct charitable contributions under tax reform.

The CARES Act also temporarily eliminates the limit placed on the number of cash contributions you can deduct if you itemize your deductions. Usually, cash donations that you can deduct are limited to 60% of your adjusted gross income, but the CARES Act eliminates the limit for tax year 2021 returns(the ones you file in 2022).

4. Take a class: Taking a course to advance your career or improve skills is also a great way to lower your taxes and boost your tax refund. Paying for next quarter’s tuition by December 31 may give you a valuable tax credit up to $2,000 per tax return with the Lifetime Learning Credit.

5. Maximize your retirement: Another great way to reduce your taxable income while building your nest egg is to make a contribution to your retirement savings account. Whether you contribute to a 401(k) or a Traditional IRA, you can reduce your taxable income and also save for the future. If you are self-employed and contribute to a SEP IRA, you can contribute up to the lesser of 25% of your net self-employment income or $58,000 for 2021.

6. Spend your FSA: If you have a Flexible Spending Account and have money left, get caught up on your doctor visits. While the old “use it or lose it” rule may not still apply, you may only be able to carry over $550 worth of unused money left in your 2021 FSA account at the end of the year. Your plan may also limit the amount of time you’re able to use your funds to 2 1/2 months after the end of the plan year.

7. Buy Low, Sell Low: If you have a few investments in your portfolio that have gone down in value, did you know you can recognize your losses and use them to offset investment winners? To do this, you need to sell the losing investments and offset your losses against your gains recognized. If your losses exceed your gains, you can apply $3,000 of that loss against your regular income. Any extra will then be passed to the next tax year.

8. Make W-4 Withholding Allowance Adjustments: If you did not have the tax outcome you were expecting in tax year 2020 or experienced life changes like having a baby, getting a pay increase or decrease, unemployment, or a new job, now is a good time to adjust the amount of taxes withheld from your paycheck by adjusting your withholding on your W-4 and refiling the form with your employer.

9. Be Aware of the Other Dependent Credit (ODC): Do you support your parents or grandparents? How about another loved one? If that happens to be you and they qualify as a non-child dependent, then make sure to take advantage of the new “Other Dependent Credit” worth up to $500, which can reduce the taxes you owe dollar-for-dollar by $500.

10. Gather Receipts Related to Your Home Property Taxes or Large Purchases: Do you pay home property taxes, pay state taxes, or did you make a large purchase and pay a lot of sales tax? You can still deduct the amount of state and local property, income or sales taxes up to $10,000. In the past, these taxes have generally been fully tax-deductible.

Don’t worry about knowing these tax rules. TurboTax asks you simple questions and gives you the tax deductions and credits you’re eligible for based on your answers. If you have tax questions, you can connect live via one-way video with a TurboTax Live tax expert with an average of 12 years experience. TurboTax Live tax experts are available in English and Spanish, year round and can also review, sign, and file your tax return or you can fully hand your taxes over to them from the comfort of your home.

Lisa Greene-Lewis

Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. She has held positions as a public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and major news broadcast to break down tax laws and help taxpayers understand what tax laws mean to them. For Lisa, getting timely and accurate information out to taxpayers to help them keep more of their money is paramount. More from Lisa Greene-Lewis

56 responses to “10 End of Year Tax Tips to Increase Your Tax Refund”

  1. My company has completely transitioned my department to working remotely and I’m fine with that. I’m sure there must be several deductions available since I’m using my home as an office. Where can I find this information?

    • Hi Veronica,

      If you’re an employee working remotely rather than an employer or business owner, you unfortunately don’t qualify for the home office tax deduction. However, it is possible that the state you live in may offer a state tax deduction. Before the Tax Cuts and Job Acts (TCJA) tax reform passed in 2017, employees could deduct unreimbursed employee business expenses, which included the home office deduction. However, for tax years 2018 through 2025, the itemized deduction for business expenses as an employee has been eliminated. Here are top tax questions about working remotely answered!

      Hope this helps!
      Katharina Reekmans

  2. I did lots of needed improvement to my house like replacing all my old and broken windows replace all my gutters around the house painting and fences replaced and other improvements like my bathrooms and showers. are they all tax deductible ? Thanks

    • Hi Masoud,

      Making updates to your home is a great way keep your home in good condition. But it’s important to note the difference better repairs and improvements as it relates to your taxes. Repairs include things like replacing broken windows, replacing gutters, and painting. Typically you can not deduct the cost of repairs to your primary residence. However, improvements to your home such as installing a new roof or new HVAC system to your home does have tax benefits because the cost of these capital improvements can be added to the tax basis of your home. While the cost of the repairs on the other hand can not be added to your tax basis.

      I hope this helps.
      Katharina Reekmans

  3. Hi Lisa,

    I recently got married in 2017 and I don’t want to file taxes jointly. When I file my taxes on turbo tax should I continue to file single or married filing single? My husband owes the IRS and I don’t want to be penalized for it. Also can I continue to file single moving forward?

  4. My wife has been unemployed in 2018, after many years as an active nurse where we had contributed to her RRA or IRA. I have been employed in 2018, making wages that would allow for me to contribute to my IRA. Would it be possible for us to contribute to her IRA’s for 2018, using wages earned by me? We file taxes as a married couple.

  5. My wife passed away in 2014. We had a vacation home which was bought in 1996 and which I just sold in 2018 at a gain of $100,000.00. The home was owned “as tenants by the entireties”. I intend to list this gain as a long term capital gain on my 2018 Federal and Maryland State income tax returns. Can I use a “step up value” for the half of the gain that would be considered as my wife’s portion. Thus I would only have to pay the taxes on my portion of the long term capital gain

  6. I prefer to download Turbo Tax from the disk each year….Because of this method I do not qualify for savings I am offered thru on line download….Does not seem fair…..

  7. I’m helping my granddaughter with college/housing expenses. Is any of this deductible? Also paid for obituary and memorial expenses for deceased exhusband.

  8. I am retiring on 12-31-18 and will be going on medicare and will be receiving benefits from my employer. I need to fill out the Federal and State tax deductions forms and am trying to determine
    how much/what percentage will keep me from owing tax next year. What is the best way to do this?

  9. There is nothing about someone living of IRA/401k distribution. There is nothing about what if someone paid full amount of Helath Insurance Premium through governement healthcare site but had no earned income (living of IRA/401k/ROTH or other retirement account) and that subsidy would apply or not and that IRS would give credit for such full payment of premium. There is nothing about how ACA apply to someone who is not US citizen?

  10. I did my 2017 taxes for the first time with turbo tax I was supposed to get $500 and I never received it. I was having problems trying to reach someone from this company to explain the reason. Is there any way for someone to check it and how do you go about this problem.

  11. I used TurboTax for ten plus years my last NYC1127 return included CT income earned by my spouseCT working we don’t live in NY I work for NYC. It is bad enough I have to pay 1127 commuter tax why did TurboTax combine our incomes.

  12. My husband had 3 surguries, 5 months out of work. Had to pull money out of 401 k to survive. Is any of expense of pulling out early tax deductible?

  13. Weve had the same foster children all year.will we be able to claim them and if so are there any changes as far as claiming our own kids.

  14. My husband has been deemed disabled and is now collecting ss disability, he is under 65. He had to take his work pension early. Are both of these totally taxable or is there a percentage?

  15. Hi, I would like to know what form can i use to do the income tax with my spouse that owes back child support, so my money won’t go to the child support back pay. He has been paying it but still owes money and since we are doing our income taxes together i do not want my money to go to back child support since i have my own kids that i am claiming in the same income tax,

  16. I filed a return in 2018 for the 2017 tax year the found more information and filed an amended return. Then I found more data that would give me more deductions. Can I file a second amended return? When must I file?

  17. . If your losses exceed your gains, you can apply $3,000 of that against your regular income, but what if you can’t use all of the entire $3000 to offset income. Can you not take the entire $3000 as a deduction? Or is it mandatory to take $3000 as a deduction?

  18. I can’t get a straight answer regarding Disability income and reporting/filing taxes. Having Disability tax answers would be very helpful for those like me. Also, do State taxes have to be filed if Federal income tax doesn’t have to be filed?
    What constitutes additional income requiring need to file? If annual gambling wins are less than maximum additional income per month, are you still exempt from filing?
    Terri L.

  19. If my son,daughter in law and grand daughter have been living with for over a year,they haven’t worked,can I claim all 3 of them this year as dependents?

  20. My losses exceeded my gains this year. Does anyone know if I can count cryptocurrency loss as part of the $3,000 of against my regular income? And will that even matter if I plan on taking the standard deduction, not itemizing? Thanks!

  21. Hello, I am a small business owner. I heard that it could benefit me to trade in my truck towards a new truck and write it off in this years taxes.. Would that be correct.

    • Only clothing that can be deducted is ‘non-street’ clothing, such as police uniforms. This is a common myth, even with tax pros, who just want your business. Even if you work at Applebees and they require purple Nike high tops and jeans, those are considered street clothing and cannot be deducted. If you are a security cop and purchase the required uniform for your job (who wouldn’t pay you back), that is deductible. Your question is always asked by salespeople (who need god shoes all the time because they walk, or business people who ‘have’ to have suits – it doesn’t work that way. It’s only for clothing like uniforms, that you would never or could never wear out.

    • Yes, but only if you do an itemized deduction. Unless you have over thousands of dollars to write off, you’ll likely be better off with a standard deduction.

  22. What version do I need to purchase this year that includes investments. Last year I had to take back the premium version for the deluxe

    • You probably cannot enlarge forms that need to be sent to the IRS or your States because they have to be read by their scanners. But if e-forms are being sent, enlarging might be possible but would probably not be a good idea if you ever had to re-file by mail.

  23. I did my 2015 taxes through turbo tax. I did not complete my state tax part. What should I do since its going to be another year.

  24. I need to file a 1041 return for my deceased wife’s trust return as well as my 1040. What TT package will handle the interface?

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